Cardig Aero Services (CASS) Penetrating into industrial area catering

Catering for growth (CASS, Not Rated, Rp830)

A play on Indonesia’s increasing flight frequency, import volume and airport capacity expansion, Cardig Aero Services (CASS) posted 25% yoy revenue growth and 33% yoy net earnings growth in 2012 with healthy ROE of 36%. Yet, shares are illiquid (6M average daily trading value of US$36k). 

Benefitted by higher flight frequency. The ground and cargo handling business (where Singapore-based SATS owns 49% stake) still contributes to 73% of FY2012 revenue. The subsidiary currently serves 34 international carriers, 9 domestic carriers and 150 consigners. It controls 70% and 40% market share for ground handling and cargo handling, respectively. Revenuefrom this segment grew by 13% yoy mainly supported by increasing import volume and higher flight frequency.

Smaller but growing maintenance business. On line maintenance service (where SIA Engineering owns 49% stake), it controls 56% market share for international flight. Last year, it added Jet Star, Air New Zealand and Air Asia as new clients. Revenue from this segment contributes to 7% of FY2012 revenue and posted 30% yoy growth last year.

The next source of growth. Food solutions business contributed to 20% of FY2012 revenue with more than double yoy revenue growth, supported by full year consolidation of food solution subsidiary in 2012. Coal contracting companies, like Pama and Buma, are the example of its remote catering clients. CASS also does in-flight catering business with 9,000 meals capacity.
Penetrating into industrial area catering. CASS is also setting up food production center in Karawang to tap into food solution service for industrial clients (it secured 300 daily meals order from Federal Oil early this month). Revenue contribution from aviation service and food solution are expected to be 70%: 30% in the next two year.

High ROE business, yet liquidity is a main concern. The business was generating around 30% EBITDA margin for the past three years. ROE was very high at 36% last year. Yet, stock is very illiquid with 6 month average daily trading value at only US$36k. No rating on this stock.

for Indonesia Market Summaries 23 May 2013